PROPOSAL TO CHANGE TO RIGHT HAND DRIVE VEHICLES
A. INTRODUCTION:
On behalf of our members, we write to formally record that we do not supports Government’s proposal to chance from left hand drive to right hand drive and respectfully seek your reconsideration of Government’s decision.
We applaud Government’s desire to make cars more affordable for all Samoans. The many changes in recent years to reduce tariff levels and increase competition in the car sales sector (private and commercial), has seen a significant reduction in the costs of new and second hand cars in Samoa. This is reflected in the number of both new and good quality second hand cars on Samoa’s roads today.
However, we consider that Government’s decision to change to RHD cars will significantly increase the cost of cars and in fact substantially harm our community rather than benefit it. We have reached this conclusion after careful review. Any reports to Government that suggest the benefits of change to right hand drive in our view are highly questionable and should be critically considered. Any report claiming that the benefits of change outweigh the costs to the community (financial, economic and social) is seriously flawed and we respectfully urge you to reconsider your decision.
B. Summary:
We consider that the proposed change will have significant negative implications for Samoa. We are deeply concerned that such a major policy change has been developed with out proper study and public consultation. We are also deeply concerned that it has been developed against all indicators that show it is an economically, financially and socially harmful policy that will have a serious impact on many businesses and people. What benefits (if any) that might be derived from change in our view can be achieved by other less expensive and traumatic change.
The negative impacts of the change to RHD include:
Financial:
1. cars will become more expensive, not less expensive – this will be exacerbated by legislative changes now being implemented in New Zealand;
2. the market value of all LHD cars will fall dramatically and they will be of little value – all existing LHD car owners (both in Apia and around Upolu and Savaii) will suffer substantial financial losses;
3. the cost of insuring cars will rise;
4. bank costs and securities for vehicle finance and car loans will be reviewed and ultimately passed on to customers;
5. severe financial loss to the motor vehicle and rental industry, and the business community more widely, with resulting financial distress and potential business closure - this has been the subject of much media discussion to date;
Economic:
6. economic cost to the country and budget implications
7. substantial implementation cost to Government of changing roading infrastructure and traffic conditions to accommodate RHD;
8. significant loss to value to Government assets being its car fleet
9. fall in investor and business confidence in Government’s unilateral decision making.
Social :
10. major safety issues resulting in the loss of life and personal injury – including the major risk of death and injury to children and other pedestrians;
11. further costs and burdens on Samoans in Australia and New Zealand;
12. promotes a dependence mentality on hand outs as opposed to encouraging personal effort and self-reliance;
Environmental :
13. unusable cars creating pressure on Tafaigata landfill or being bumped on roadsides.
Other policy options
We suggest that Government do not pursue the RHD change but consider other policy options to meet the goal of more affordable cars such as;
- removing all customs duties and excise on vehicle and vehicle spare parts imports
- introducing a vehicle rebate scheme for the agriculture sector
- prioritizing improvements in the safety, efficiency and affordability of public transport services in particular buses which the majority of Samoans use everyday by introducing and enforcing stricter road safety guidelines, by removing all tariffs and customs duties on the imports of these vehicles and by exempting buses from registration fees.
There will be costs associated with these policy options as well but we believe they will be considerably less compared to financial , economical,, social and environmental costs of the policy change Government is pushing.
C. Government rationale for decision and general effects of decision:
The rationale for the decision and any benefits that the policy may have has not been formally released. This places us and the general public in a difficult position to provide specific comments and analysis of a policy that for all apparent purposes appears to have been made without a proper feasibility study and detailed analysis. We ask that any reports or analysis upon which the decision has been made be publicly released for discussion.
We understand that Government’s decision to change to RHD is based on the view that the switch to RHD cars will mean:
- a drop in the price of cars; and
- families in Australia and New Zealand will be able to send cars to people in Samoa, particularly farmers.
It is our view that in fact:
- the cost of cars will increase by changing to RHD;
- the vast majority of Samoans will be worse off once cares are more expensive since most Samoans and Samoan businesses but their own cars;
- a move to RHD promotes a dependence mentality relying in handouts from overseas; and
- the decision announcement has led to a serious loss of business and investor confidence.
- the decision has been made without proper study and analysis and without public consultation
Promotes dependence mentality
Government’s decision is likely to have substantially negative effects through the underlying message it sends to people. At a time when Samoa has been independent for 45 years, and will be graduating for its least developed country status in three years time, the policy signals Governments continuing dependency on aid handouts from donors and promotes better continuing dependency by our own people on families overseas. It not only discourages better discipline and prioritization in the use of their own national resources, it also discourages personal effort and the motivation and ambition to get ahead independently. How can we as a proud and independent country and people stand tall and compete internationally and regionally if Government’s policies encourages increasing dependence on remittances (cash and cards)? The decision also imposes and unfair burden on our families in Australia and New Zealand.
Paul Holden, an Asian Development Bank consultant is reported in the Samoa Observer on 9 October 2007 to have said:
“I was in Samoa last week and it was the week in which it was announced that there was going to be a switch from driving on the right to driving on the left…But one of the justifications for it was that families living in Australia and New Zealand could send vehicles back home…Now this really struck me as amazing…You’re saying “well, we want to change from driving on one side of he road to driving on the other so we could get a gift, right..this really typifies a hand out mentality.”
This comment reflects the message the policy sends to people and that in our own view is a message that only harms the significant effort by Government and the private sector to increase labour force participation and productivity.
Harm to business confidence
The decision to change to RHD and the lack of Government dialogue with business in the decision has led to a serious loss of business confidence. This is most disappointing given Government’s often stated commitment to transparency and accountability. This is due to the failure by Government to consult and the unilateralism in Government’s decision that has been made with apparent disregard to the welfare of the business sector and the country as a whole . This will have significant and detrimental effects on investor confidence and development in Samoa. These impacts plus the likely costs (discussed below) of the policy change should warrant reconsideration of the decision.
D. Implications of Proposed Change:
(i) Financial
The financial impact of the policy change is considerable and affects a wide cross-section of the community. It has already had a significant negative effect on many businesses (particularly motor vehicle sellers and rental car companies), some of which may not recover and may close down. Where businesses close down, people will lose jobs and families lose livelihoods. All LHD car owners have suffered a significant loss as the value of the car has disappeared and there is no market to sell LHD cars. These are significant and real problems faced by a number of businesses and people.
Loss of value of cars
For all Samoans who own a car, the value of their assets has now been massively reduced. We estimate that the financial cost to car owners in loss of value in assets is between $190 million and $290 million . The immediate effect of the policy is to write off up to $290 million [$191,250,000. - $286,875,000.00] out of the economy.
These estimates are based on conservative figures; there are approximately 17,000 cars on the roads, applying a conservative $22,500.00 average value for each car, and assuming that the value of the cars have reduced by between 50% and 75% is more realistic.
Every Samoan who owns a car loses out financially – simply for the few who might receive a car for Christmas from New Zealand – it makes no sense.
Impact on vehicle business
The proposed changes have created huge uncertainty and unnecessary panic within the business community so that businesses are now suffering significant hardship. The Transport Control Board (TCB_ has advised the public against buying any LHD cars from 21 September 2007. However, it does not appear that RHD cars can be brought into the country until July 2008. This raises some real practical difficulties including:
- for all car retailers, substantial loss in value of stock onhand or on order plus the stock not being able to be sold, and no new stock being able to be sold until July 2008;
- for anyone wanting to buy a new car must wait until July 2008 before they can buy a RHD; and
- anyone buying a new LHD car loses a significant proportion of the value of the car is immediately on purchase because of the reduced market in which to resell it.
The immediate impact on our members of the Transport Control Board’s public notice is significant and on going:
-In one instance, the TCB’s public notice cost $600,000 in lost sales in one day alone and a further $320,000 in lost confirmed future sales for October.
- Another rental car business that was to be sold for $1.5 million fell through simply due to the announcement and the uncertainty it has created.
- A number of LHD cars now sit on wharves in the United States paid for but now not being sent to Samoa.
- Many left hand drive cars now sit unsold in many car lots in Apia with no reasonable prospect of sale.
The rental car industry in Samoa currently has a fleet of approximately 600 rental cars. A member of the rental industry has carried out a survey of rental users and the survey shows that car rental users would not rent a left hand drive car if the proposed change proceeds next year. Adopting a conservative ST$30,000 value for each rental car (most rental cars are less than 3 years old), the loss to rental businesses in Samoa amounts to ST$18,000,000 – a substantial figure in our small rental market threatening the livelihood and survival of these successful businesses.
These are simply a few examples of many other instances of hardship. The decision is having an immediate effect on people and real people are being hurt by the decision.
Financial Analysis
The rationale for change is the suggestion that cars will become cheaper. The reality is that cars will in fact become more expensive and Government’s conclusion that cars will become cheaper is simply wrong. In three separate analyses by Chamber members, all three concluded overwhelmingly that cars will be more expensive from New Zealand and Australia than from the United States. This holds true for both imported new and used vehicles.
Vehicle Type Australia New Zealand used Samoan
Toyota Corolla 2005 ST$62,739.00 ST$60,201.00 US ST$57,466.00
Hyundai Tucson 2005 ST$94,960.00 ST$74,975.00 ST$60,959.00
Toyota Rav - ST$71,434.00 ST$60,075.00
Toyota Camary 2006
-
ST$57,377.93
ST$51,360.46
Comparative pricing of new cars (landed)
The table above shows comparative pricing of various cars popular in Samoa from Australia, New Zealand and the USA. These figures show that new cars from the USA up to 23% cheaper than those from New Zealand.
Vehicle Type New Zealand used Samoan new
Hyundai Getz ST$38,608.92 (2000 model) ST$40,850.00 (2007 model)
Kia Sportage ST$63,598.64 (2002 model) ST$61,000.00 (2007 model)
Mazada pick up ST$71,078.27 (2004 model) ST$68,000.00 (2007 model)
Toyota Hiace Van ST$62,739.00 ST$65,000.00
Comparative- pricing –NZ used cars vs Samoan new cars (landed)
New vehicles in Samoa are competitively priced and are in fact often cheaper than imported used cars from New Zealand. These figures show that new vehicles bought in Samoa are cheaper than older and used vehicles imported from New Zealand, or very comparable in price. Attachment A shows the full price comparison.
Changes to NZ vehicle market
The price difference between cars from the USA compared to New Zealand will become greater with changes to be implemented in New Zealand. Attachment C is a newspaper article about proposed changes New Zealand laws that will see the price of diesel vehicles in New Zealand about to double in price. Added to this are proposed changes to the importation into New Zealand of second hand Japanese imports that will increase these costs and mean the price of cars from New Zealand are about to rise further. The savings on the cost of cars from the USA will become greater and therefore, the change right hand drive cars will have a major negative cost impact on all Samoans in Samoa.
Further, by changing to right hand drive, it is likely that insurance premiums will also increase reflecting the increased risk associated with the switch to RHD – a cost that will be passed on to the consumer and car owner.
In summary therefore, from a financial analysis of the change, there appears to be no positive outcome from the proposed change.
(ii) Economic:
The economic cost of the proposed change to Samoa will also be substantial. This will be reflected in a number of areas including:
∑ loss of business and investor confidence that may result in investors and businesses reluctant to invest in Samoa;
∑ the write off in the asset value of cars from the economy amounting to between $191,250,000.00 - $286,875,000.00;
∑ the loss of the value of Government and Government Corporation cars and the replacement of the Government’s car fleet paid for by the tax payer and business. This cost will run into the millions; and
∑ the implementation costs to Government including changes to all roads and road markings; all signs and signages, traffic lights, all parking bays (including cost of changes in angled parking) and all road infrastructure to facilitate the change to right hand drive. These costs will amount to millions and will be paid for by taxpayers and business.
These costs are substantial and many of the costs will not be foreseeable. We consider the economic risk to be a major risk to our economic stability and business confidence and accordingly ask for your reconsideration.
(iii) Social Issues:
The loss of one life because of the change in policy will be one life too many – and indeed, potentially many lives will be lost by the change. Most at risk will be our children, and that responsibility for loss will ultimately be the responsibility of Government should the change to right hand drive proceed.
The safety risks of the proposed change cannot be over-emphasised. These include (amongst many other risks):
∑ people exiting van sliding doors into on-coming traffic – the risk of absent mindedness or accident is substantially increased with young children, the sick, the elderly or intoxicated people exiting a van and not taking proper precautions because of their age or state;
∑ buses with passengers disembarking into on-coming traffic will be at significantly higher risk with cars passing either from the opposite direction or cars moving to pass the stationary bus. Passengers will also be at risk as they move from the centre of the road to the side of the road from traffic in both directions;
∑ drivers used to driving on the right hand side of the road will inadvertently drive on the right hand side posing a danger to on-coming traffic;
∑ for many many years to come, right hand drive cars will outnumber left hand drive cars. The risk to traffic by over-taking cars that cannot see clearly for over-taking as the driver will be positioned on the curb rather than the center line of the road will greatly increased the risk of head-on collisions – and this risk is recognized by government’s own decision to ban right hand drive cars some years ago;
∑ pedestrians accustomed to cars approaching from the left will be at greater risk; and
∑ the structural integrity of cars that are modified from left hand drive to right hand drive involves the modification of the car’s brake and steering systems. This can seriously affect the safety of the car’s component strengths, increase susceptibility to fatigue and failure and reduced handling and safety.
The conversion of cars from left hand drive to right hand drive ((f) above) requires specialized mechanical skills and involves significant structural and mechanical changes to a car. These include the;
∑ removal and replacement of steering system;
∑ replacement of dash and electronics;
∑ removal and replacement of braking system;
∑ switching of entry doors on buses (including steering, dashboard etc); and
∑ removal and re-fitting of airbags and airconditioner.
Interfering with the original layout of a vehicle in this way substantially undermines vehicle integrity and lowers vehicle performance. The safety issues that the proposed change creates are substantial and has not been addressed or apparently considered by government. Government’s decision, should it proceed, is reckless and dangerous and cannot in anyway be justified by any perceived benefits.
(iii) Environmental Issues:
Samoa’s environment will also be damaged by the switch to RHD. An enormous number of vehicles will reach the end of their useful life well before they would otherwise, since they will be discarded as unusable, or dumped because they cannot be sold. This will put significant pressure on the Tafaigata landfill or result in cars being dumped around the countryside.
CONCLUSION:
This submission raises a number of serious concerns relating to Government’s decision to change to right hand drive cars. A number of these concerns have been exacerbated by how the decision has been made and indeed, that from an overall economic, financial and social examination of the decision, we can identify very little (if any) benefit that will flow to Samoa from the implementation of the decision.
Clearly, in reaching its decision, Government will have had the benefit of various reports and analyses to base its decision. We respectfully ask that you view any such report and analysis with real skepticism and reconsider the decision by Government to change to right hand drive. In this context and at this time, we are respectfully asking Government to :
(a) withdraw the decision to change to right hand drive;
(b) release or identify reports and analyses that support a change to right hand drive; and
(c) initiate a consultation process with the public and interested stakeholders to consider the merits of a change to right hand drive.
We also suggest that Government consider other means to reach its policy goal of more affordable cars such as:
∑ removing tariffs/duty on vehicle and vehicle spareparts imports; or
∑ introducing a vehicle rebate scheme for the agriculture sector.
∑ Prioritizing improvements in the safety, efficiency and affordability of public transport in particular buses which the overwhelming majority of Samoans use everyday.
We understand Government’s wish to further reduce the cost of cars in Samoa and this desire is to be applauded. The leadership that Government has taken domestically and regionally in reform has been widely applauded. Those efforts have had strong support from the business and community and it is rare that we as a group ask of our Government to reconsider an issue such as this. However, such is the gravity and importance of this matter and its impact to our members and our community that we respectfully ask that your reconsideration of this matter.
We hope that you are amenable to our respectful request for reconsideration and would very much welcome the opportunity to contribute to further discussion of this matter with Government.
Yours faithfully
__________________________
Saumani Wong Sin
Vice President
Samoa Chamber of Commerce & Industry Inc.
__________________________
Papalii Grant Percival
President
Samoa Association of Manufactures & Exporters
_________________________
Vaasilifiti Moelagi Jackson
President
Samoa Umbrella of Non Government Organisations
_________________________
Anamaitu Tauiliili Pasitale Afamasaga
President
Taxi Driver Association of Samoa
_____________________________
Sheree Stehlin
President
Women in Business
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